Archive for the ‘Public Performance Management’ Category

Economic Losses from Hurricane Isaac Could Reach $21 Billion

Tuesday, August 28th, 2012

Author: Dr. Lloyd Blanchard, Director of Public Performance Management, IEM

Hurricane Isaac is currently predicted to make landfall near New Orleans on or just before the 7-year anniversary of Hurricane Katrina. However, global security consulting firm IEM estimates the results will be far different.

Katrina was a Category 3 storm that caused $108 billion in damages (the costliest ever in terms of dollars) and about 1,200 deaths (the most from a hurricane in 84 years). A day before projected landfall, Isaac has just reached hurricane strength with winds at 75 miles per hour, and is expected to make landfall as a Category 1 or 2 storm. According to IEM economist Dr. Lloyd Blanchard, “Based on this current information about the storm, IEM estimates that Isaac will cause less than 30 deaths and result in damage costs ranging from $18 to 21 billion.”

While the most obvious difference between these two storms lies in their severity (as measured by the Saffir-Simpson scale), the difference in wind speeds does not explain the difference in likely outcomes. (more…)

Making sense of the debt ceiling debate

Thursday, July 28th, 2011

Author: Dr. Lloyd Blanchard, Director of Public Performance Management, IEM

The debt ceiling debate has gripped the nation so much that we have focused on the political game of brinksmanship and lost focus on the two basic questions underlying the debate. First, what will happen if the debt ceiling is not raised? Second, is the nation’s level of debt too high? Let’s look at the data.

The answer to the first question is…we don’t know. We have never been here before. Oh, we have approached the debt ceiling many times, but raising it was never in question…until now.

Will we default? Not likely, because the Constitution demands that we don’t. If all proposed deals to reduce spending as a condition to raise the debt ceiling fail, Congress will likely pass a one-sentence bill to raise it. For how long and by how much is unknown. The markets seem to maintain confidence that the debt ceiling will be raised.

If Congress doesn’t raise it, will we default? Yes, and the market consequences would be dire. The 3 rating agencies would likely downgrade the nation’s sovereign credit rating. Such a downgrade would raise interest rates on US Treasury securities, creating major losses in the market.

If they don’t raise it, can the US pay its bills? No. According to the Bipartisan Policy Center, the Treasury is expected to run out of cash around August 2nd.  For the rest of August, the government is expected to collect $172.4 billion in revenues and must pay $306.7 billion in obligations. This leaves a $132.4 billion gap (just for August) that would normally be covered through borrowing. In August, about $500 billion in Treasury securities will mature, and while usually these are simply “rolled over” (borrow by selling new securities to pay the principal and interest on the maturing securities), the present debt limit would prevent this. Other big obligations in August include $50 billion in Medicare/Medicaid payments, $49 billion in Social Security payments, $32 billion in payments to Department of Defense vendors, $20 billion in Department of Education payments, $17 billion in federal employee salaries and benefits (including active duty military), and $13 billion in unemployment insurance payments, among others.

The answer to the second question is…yes, the debt level is at an historically high level, comparable only to levels in response to the Great Depression. (more…)